HMRC's latest Trusts and Estates newsletter contains some useful information. Here is our enhanced version together with a reminder of upcoming and recent changes.
Consultation on Income Tax for low-income trusts and estates
- HMRC has opened a new consultation, ‘Income Tax: Low-income trusts and estates’ which considers whether trusts and estates with small amounts of income should be removed from Income Tax.
- The consultation closed on 18 July 2022 and responses are awaited.
Upcoming Trust Registration Service (TRS) deadlines
- The deadline for registering most trusts on the TRS is 1 September 2022.
- The deadline to register non-taxable trusts in existence on 6 October 2020 is 1 September 2022.
- This also applies if the trust has since been closed.
- Non-taxable trusts created after 6 October 2020 must register by the latter of:
- 90 days of being created or otherwise becoming registerable.
- 1 September 2022.
- Taxable trusts created on or after 6 April 2021 must register by the latter of:
- 90 days of the trust becoming liable for tax.
- 1 September 2022.
See Trusts & Estates: What’s New May 2022 for other changes highlighted by HMRC during 2022-23.
HMRC Trust and Estates newsletter August 2022
Reporting a discrepancy in Trust Registration Service data
From 1 September 2022, relevant persons must ask trustees/agents engaging in a new business relationship with them to provide proof of registration on the TRS.
- A relevant person, or obliged entity, is an organisation working in a professional capacity that carries out due diligence checks under Anti-money laundering regulations.
- The trustee/agent engaging in the business relationship must download proof of registration under the TRS and provide it to the relevant person.
- If a relevant person finds a discrepancy in trust data when reviewing proof of registration, they should try to resolve this with the trustee/agent engaging in the business relationship. If they cannot do so they must report it to HMRC.
- If a discrepancy is reported, HMRC will write to the trustees asking for it to be resolved. If the trustees wish their agent to action the discrepancy letter, they must pass it on to the agent, HMRC will not write to the agent directly.
- Once the trustee/agent has made the appropriate changes, they should download a new proof of registration document and supply it to the relevant person. If the relevant person is satisfied the discrepancy has been resolved they can continue to engage in a business relationship with the trust.
Trust Registration Service Data requests
- In limited circumstances, HMRC may share information on the TRS with some third parties following a Trust Data Request submitted on or after 1 September 2022.
- For a Trust Data request to be a Legitimate Interest request, individuals/organisations must demonstrate that they are looking into a specific instance of money laundering or terrorist financing in respect of a specific trust and that the information on the register that is the subject of the request will further that investigation.
- If HMRC deems the legitimate interest has not been adequately demonstrated, they will not share information on the register.
- Legitimate interest is not adequately demonstrated when:
- The requestor is not requesting data to further an investigation into a specified instance of money laundering or terrorist financing.
- The information provided by the requestor does not sufficiently show reasonable grounds for suspicion of money laundering or terrorist financing for the specific trust for which the request has been made.
- Data can also be requested on a trust that holds a controlling interest in a non-EEA company or other legal entity. A ‘controlling interest’ is where the trust holds > 50% of the shares in the entity or can control it in some other way.
- If TRS records do not show that a controlling interest in an offshore company exists, HMRC will not share information held on the register.
- The information HMRC can share about a trust will be limited to the beneficial owners associated with the trust.
- For individuals, this includes name, month and year of birth, country of residence, nationality and their role in the trust.
- For companies and other legal entities, it includes only name, office address and their role in the trust.
- HMRC will not share data on certain types of trusts, for example:
- Non-express taxable trusts that are registered only because of a liability to UK tax.
- Express trusts excluded from registration that are only registered because of their liability to UK tax.
- Non-UK trusts with no UK resident trustees that are only registered because they hold UK land/property.
- HMRC will not share information on specific individuals if exemptions apply, this means if they have been made aware that the individual:
- Is under 18.
- Lacks mental capacity.
- Is at a disproportionate risk of fraud, kidnapping blackmail, extortion, harassment, violence or intimidation as a result of releasing that information.
- If you are a trustee and consider that a beneficial owner of the trust would be exposed to a risk of any of the above as a result of their trust information being disclosed, let HMRC know.
Posting your IHT400 Inheritance Tax (IHT) account to HMRC
- When sending your IHT400, do not include any other HMRC forms or letters relating to non-IHT matters as this may result in a delay in processing your account and issuing your IHT421.
A new way to pay Inheritance Tax
- You can now pay your IHT bill online via your online or mobile banking app.
- Do not include probate fees in the payment amount.
- Payments from a deceased’s bank account cannot be made this way. You should use form IHT423. If, exceptionally, you need to pay by cheque, send this separately to form IHT400.
Process for Inheritance Tax clearance
- To apply for clearance in respect of an IHT liability, you must use form IHT30 ‘Application for a clearance certificate’ but only if you are sure there will be no further changes that will affect the tax position of the estate. HMRC will not accept letters requesting clearance.
- The IHT legislation states it is appropriate to apply for clearance once two years have passed since the date of death. HMRC would not normally expect you to apply until at least a year has passed. In practice, HMRC will consider earlier requests but only if you are sure that there will be no changes to report.
- During COVID-19, HMRC replaced stamping and returning the IHT30 form with a separate certificate, SL120. This change is now permanent.
Original documents for Inheritance Tax accounts
- Do not send original wills, deeds, or powers of attorney with your IHT account. HMRC cannot guarantee their return and photocopies are perfectly acceptable.
Capital Gains Tax on UK Property Account Guidance
The guidance in the manual for the Capital Gains Tax on UK Property Account has been updated
Useful guides on this topic
A guide to UK trusts and how they are taxed.
This guide considers the UK tax issues related to non-resident trusts and the pitfalls to watch out for.
IHT: Estate planning checklist
A checklist covering some essential points taxpayers should know when planning for their estate and inheritance tax.
Trust Registration Service
What is the Trust Registration Service? What trusts does it apply to? What are the requirements and deadlines?
Trusts & Tax planning
What is a trust? How can trusts be used in tax planning? What are the advantages and what are the pitfalls?